Average Corporate Tax Rate Fell By 50% After 2017 GOP Overhaul
The average U.S. corporate tax rate fell by more than half, to 7.8 percent, following the 2017 Republican tax overhaul, according to a new report, which examined the tax year 2018. Taking into account deferred taxes which will be paid in the future, the average rate fell to 13.1 percent from 19.7 percent in 2017.
The report, issued by the official Joint Committee on Taxation, also said that corporations continue to use offshore tax havens such as Bermuda to reduce tax bills. In fact, about 10 percent of companies’ foreign-sourced profits are booked in Bermuda, where they paid a paltry 0.4 percent government tax rate.
On the other hand, many companies also made investments in major markets like China, Canada, Germany and Mexico, all of which have significantly higher tax rates. Additionally, 10 percent of companies’ foreign workers were in India, where corporations were required to pay an average 40 percent government tax rate.
“GILTI,” a tax created by Republicans to target money stowed in low-tax jurisdictions, has been somewhat successful at increasing companies’ tax rate, with businesses paying an average of 16 percent on GILTI income.
Democrats, such as Senate Finance Chair Ron Wyden (D-Oregon), are pushing to make provisions like GILTI even more stringent, especially considering the big-ticket spending initiatives currently being pushed by Democratic lawmakers.
Democrats have argued that the 5.5 percent GILTI rate is too big of a discount for corporations, especially when compared to a 21 percent domestic tax rate.